1. Technical Field
The field of the invention is optimization methods, tools and programs.
2. Description of Related Art
Bulk product blending and packaging plants are known in the art. Illustrative bulk products made in such plants are oil products (e.g., lube oil, waxes and greases), surface coatings (e.g., primers, paints, stains and varnishes), health & personal care products (e.g., liquid laundry detergent, dishwashing liquid, shampoo and conditioner, liquid soap, and body wash), and food & beverage products (e.g., alcoholic drinks, soft drinks, bottled water, and condiments). These plants make a multitude of product grades and sizes.
Ensuring capacity, production and inventory to meet the uncertain level of demand for a multitude of product grades and sizes presents a challenging problem. One solution has been to simply maintain excess levels of inventory and/or reserve spare manufacturing capacity sufficient to meet any unanticipated spike in demand for a given product. However, this approach is costly.
Present practice separates long and medium term capacity planning from the production and inventory planning in a hierarchical manner. In other words, capacity decisions are made first and then become constraints in the later planning of production and inventory.
More particularly, capacity planning is often done every two or three years for a mid to long range horizon of up to a few years. Capacity planning is also typically split into a two-step process consisting of long range capacity planning and medium range capacity planning. For example, long-range capacity planning may involve strategic resource decisions such as plant expansion or contraction, new plant openings or closings, etc., based on predicted demand forecasts and/or the company's long term business strategy. In turn, medium-range capacity planning may involve adding or removing shifts (often accompanied by an addition or reduction in workforce), adding equipment, adding or removing workers in a given work shift, permitting or requiring overtime work, etc. These medium-range planning decisions are typically made after the long term decisions on aggregate capacity (a.k.a. maximum production rate) have already been made.
In contrast, production and inventory planning is typically done biannually or quarterly to make shorter term decisions on the required levels of production and safety stock in view of predicted demand while keeping aggregate capacity—typically expressed in terms of volume per unit time—constant. For example, within a given plant configuration and a specified operating schedule, production batch size can be optimized to meet the demand requirements at the lowest manufacturing cost. Since each batch production may incur changeover costs, production of larger batch sizes can allow for reduced costs by reducing the number of changeovers needed. However, larger batch sizes tend to increase the wait time needed for other batches to be processed, thus requiring increased levels of safety stock to meet demand. This increases inventory holding costs. Thus, the operation of a bulk product blending and packaging plant can be improved by finding an optimum batch quantity that balances these competing costs.
Currently, because production and inventory planning are done hierarchically separate from capacity planning, the resultant operational plan may fail to realize certain opportunities to reduce cost and/or capture increased demand. An operational plan conceived in this manner might fail to capture an opportunity to reduce cost by carrying less safety inventory immediately following an increase in capacity before arrival of the anticipated increase in demand. Conversely, an operational plan conceived in this manner might fail to capture an increase in demand by carrying more safety inventory before capacity is increased after a sustained increase in demand. Hierarchical planning will not always yield the most optimum planning of production and inventory.
The current state of the art includes the Rough Cut Capacity (RCCP) and Capacity Requirement Planning (CRP) steps implemented in most Enterprise Resource Planning (ERP) software packages. Both the RCCP and CRP techniques can be used to verify whether sufficient capacity exists to meet the requirements of a proposed master production plan and to provide an aggregate capacity recommendation for meeting the plan. However, a tool to recommend the appropriate amount of capacity expressed in terms of equipment, operating shift structure and workforce is not available.
Thus, there is a need for more integrated decision-making methods, tools and computer programs to improve the operation of bulk product blending and packaging plants.